EQC secures reinsurance cover
The Earthquake Commission has secured reinsurance cover worth $4.5 billion, up from $3.25b last year, chief executive Ian Simpson says.
The cost of cover was about 10 per cent lower than last year and the saving was ploughed back in to secure the extra $1.25b, Simpson said today.
The annual cost of about $150 million, out of EQC's total income of $240m, included a reinstatement clause, so if there was a second disaster EQC would get another $4.5b.
The reinsurance lifts the total cover, including the first $1.75b covered by the Crown, to $6.25b.
Simpson said it was now one of the largest reinsurance programmes in the world.
The $4.5b figure compared with cover of $2.5b in 2010, before the Canterbury earthquakes, although the cost then was just $40m.
"I think it will be some time before we see the pricing we saw before 2010." Simpson said.
The earthquakes wiped out EQC's natural disaster fund, and the Crown covers any amount above that.
Simpson said EQC was waiting for a review by Treasury before making a call on rebuilding the fund.
His view was that the dedicated fund "worked remarkably well for New Zealand" in the Canterbury earthquakes.
EQC estimates its median exposure from a big Wellington earthquake would be $7.5b. It has about 50 global reinsurers on the programme.
Simpson said the reinsurance markets were getting "softer" and there was a lot more capital coming into the market, including into new "catastrophe bonds", although EQC did not use those.